The Bright Side of the Panic of '08

 Written by Christopher Ketcham    Thursday, 31 January 2008

 

Trends for Downsizing the US: The Bright Side of the Panic of ‘08  
by Christopher Ketcham  

Futurist and trends forecaster Gerald Celente, director of the Trends Research Institute in Rhinebeck, NY, predicted the 1987 stock market crash, the collapse of the Soviet Union in 1989, the Asian economic implosion of ‘97, the decline of the dollar beginning in 2005, the meteoric rise in gold prices in an age of currency volatility, and the turn of events that may be the blessing of our era, the subprime mortgage crisis.

 

Now in his Report for 2008, issued in mid-December, he carried the news every thinking American already knows. “The United States of America,” Celente pronounced, “has gone from first class to third rate.” It’s a “nation on the skids and heading down.”

 

Celente projects economic and political crisis in the coming year. “In 2008, Americans will wake up to the worst economic times that anyone alive has ever seen,” he wrote on December 17. “Just as they didn’t see 9/11 coming and were frozen in shock when terror struck, [Americans] will be frozen in shock when terror strikes again.” He predicts “failing banks, busted brokerages, toppled corporate giants, bankrupt cities, states in default, foreign creditors cashing out of US securities…the stage is set, the big one is on its way.”

A similar wake-up call was issued last summer in a report by none other than the chief investigator for the US Government Accountability Office, comptroller general David Walker, who warned that US policy on energy, education, the environment, health care, immigration, Iraq – pretty much the gamut – was on an “unsustainable” course, bound for a maelstrom of insolvency that could threaten to sink the ship.

 

According to the GAO chief, the fall of Rome seemed an apt historical comparison:

 

• “[D]eclining moral values and political civility at home, an over-confident and over-extended military in foreign lands, and fiscal irresponsibility by the central government. Sound familiar? I’m trying to sound an alarm.”

When I called up Celente on Jan. 2 to see how the new year was taking shape on the first day of trading, he fired back in an e-mail:

 

• “An attack in Nigeria (Africa’s biggest oil producer) by anti-government forces on the port city of Port Harcourt hit the futures markets hard. On the New York Stock Exchange, trading conditions worsened on reports that the Institute for Supply Management's manufacturing index dropped to 47.7, the lowest reading since April 2003. Growth in European and Singapore manufacturing also slowed in November, showing signs for all those that were looking that the slowdown would be global.”

 

By early afternoon, gold had surged $24 an ounce, crude oil climbed $3, the dollar fell against all major currencies, and the Dow was down over 200 points. The next day, Jan. 3, oil hit a record $100 a barrel. And indeed, as Celente warned, world markets were unraveling by the second week of January, the Nikkei on its worse start to a new year since 1970, the MSCI World Index dropping 6.9 percent, a loss of $2.1 trillion from members' market capitalization, while Swiss world banking giant UBS posted a $13 billion loss, and authorities in Britain reported the first run on a British bank in a hundred years.

When on January 14 Celente sent out his weekly e-mail alert to subscribers, the news was no better. The Dow registered its third consecutive week of losses, one of its worst New Year starts in history, losing in just the first week of 2008 half its gains from 2007.

 

• “Slumping retail sales, dire housing data, rising unemployment rates, gloomy consumer confidence, spiking oil prices, a ballooning trade gap, eroding wages, mounting credit card debt and delinquencies, mortgage defaults, record foreclosures,” said Celente. “The data floods the wires and spreads the fear.” It’s telling that Tiffany's was off 11 percent in sales, as even the very rich hide their cash under beds.

So is the subprime mortgage mess the catalyst for the Big One, what Celente calls the Panic of ‘08? Stock guru Jim Cramer, host of CNBC’s Mad Money and co-founder of TheStreet.com, seems to think so.

 

• “There are a group of insurance companies that insure all these bad mortgages,” he told Chris Matthews on Jan. 18. “And I think they’re all about to go belly up. And that will cause the Dow Jones to decline 2,000 points. They have got to be shut down. This is going to happen in maybe two, three weeks, Chris. It’s going to be on the front of every paper. And no one in Washington is even willing to admit it. I am telling you these companies do not have the capital to make good. And, when they do fall – I believe it is when – if the government doesn’t have a plan in action, you will not be able to open the stock market when they collapse…No one is even talking about it.”

From panic, offers Gerald Celente, will arise almost overnight an era of social and political upheaval and plain awfulness. Self storage will finally “live up to the meaning of its name. Down and out, thrown onto the streets, homeless Americans will empty out storage lockers of useless junk…to store themselves.”

 

He predicts wage riots and anti-government street protests and intensified anti-immigration movements looking to scapegoat the “aliens” among us.

 

Toward the 1 percent of Americans who received 50 percent of all income gains in recent years – those same 1 percenters, roughly 3 million people, who took in 22 percent of all income in 2005 – there will be growing rage.

 

• “Kidnappings for ransom will become common, as they were in the Depression and as the poor strike out against the rich,” Celente predicts. Lawlessness will be met, as in most third rate nations, with violence from an increasingly sophisticated and brutal police state. A different type of violence from the ground up, tax revolts, will also develop in strength, targeting a tax-ravenous federal government that Celente charges has failed “to protect food, win wars, clean the environment, upgrade infrastructure, improve living standards, provide health services or advance education.”

Meanwhile, the dollar will bottom out at 10 cents to the euro sometime in the next several years, perhaps by 2010. Newspapers report that even Third World vendors are beginning to refuse payment in greenbacks, while foreign governments and investors, mostly the Chinese, deploy the muscle of their currencies to buy US property and businesses (proxies of the Chinese government late last year snagged a 5 percent stake in Citibank, a 10 percent stake in Morgan Stanley).

Note that this is no fringer veering into conspiracist phantasm: Celente consults for hundreds of large and small corporations, addresses government bodies worldwide. Norway flew him to Europe in 2006 to address a conference on innovation, while the International Council of Shopping Centers hosted him as the key-note speaker at its 2007 convention – the mall builders hoped to glean from Celente “what people want from malls.”

 

It’s notable, in the wake of the prognoses of his 2008 reports, that he is no longer invited onto the TV and cable networks – “the first year in decades,” he says, “that they did not have me on and that USA Today did not cover the Trends Report.” When Celente sent out an e-mail alert to his mailing list in mid-January, Jack Marks, the publisher and CEO of The Wall Street Reporter, one of the oldest investment organs in New York, wrote him back to say “You are a fucking retard motherfucker” and “Remove me from this list, you fucking moron.”

 

The local publishing group near Celente’s home in Rhinebeck is perhaps more typical in its spinelessness: The Taconic Press, which publishes six newspapers in the Hudson Valley and upstate New York, told Celente in December via e-mail that there was “a general uproar about the inclusion of your Trends forecast [in 2007]… reader and advertiser reaction was strong, and they made their feelings known to our publisher.” Celente’s long relationship with Taconic Press is no more. Par for the course in the nation of blinkered denial.

There is apparently an upside to the rottenness to come, according to Celente – if Americans dare to reinvent for the 21st century the free thinking and civic courage of their past. This good cheer as Rome burns is buried somewhat in Celente’s report for 2008, but what it suggests is that, catalyzed by crisis, a fair number of Americans – a minority, likely, but still to watch – will begin this year a transformation of consciousness.

 

“Like Katrina’s victims that knew the hurricane was coming but didn’t flee – and looked to Uncle Sam to save the day – those that don’t take action before panic strikes or wait for Washington to lend a hand, will suffer the most from the calamity that follows,” he writes.

 

There will be a downsizing of expectations and perceived needs. There will be a downsizing of giantist institutions to fit to human scale – the center cannot hold, particularly as state’s righters and tax rebels and what Celente calls “the newly flourishing state secessionist movements” begin to repudiate a $9 trillion-in-debt federal government that too often practices the most offensive kind of taxation without representation. Altogether, there will be a downsizing of America.

• “This could be the end of something really ignorant and stupid and dark,” Celente told me recently in a phone interview. “The end of a dark age! The end of the age of what I call Bottom-Line Fascism, the ruthless and dictatorial profit-only way of thinking that produces crap over quality in all the major institutions, dopiness and blob-thinking, the manipulations of an idiotic media and political establishment, the Cartoon News Networks, the Greta Van Susterens and the Hillary Clintons uttering the same pablum ad nauseum over and over. All the institutions are coming apart – government, corporations, media, education, health care. They present nothing less than a vacuum! Something has to fill it! The systems that are in place? Things can only get worse if they stay in place. But I’m an optimist. I’m gunning for something better to replace what we got.” He pauses. “A renaissance! I’m gunning for a renaissance: an era where quality beats out the crap of quantity.”

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POSTSCRIPT: Alarm bells are also ringing for former CIA consultant Chalmers Johnson, author of the Blowback Trilogy, including most recently the final installment Nemesis: The Last Days of the American Republic. Like Celente, Johnson sees the subprime mess as only the most visible part of a far-reaching debt crisis with lethal implications. “Confronted by the limits of its own vast but nonetheless finite financial resources and lacking the political check on spending provided by a functional democracy,” Johnson wrote in Harper’s last January, “the United States will within a very short time face financial or even political collapse.” The folly of what Chalmers terms “military Keynesianism” – devotion to militarism, weapons, warfare as fiscal stimulus, a policy embraced with equal fervor by both parties in Congress – will speed the country to moral, fiscal and political bankruptcy. To grasp the horror of military Keynesianism, consider this statistic: By 1990, production for the Department of Defense amounted to 83 percent of the value of all manufacturing plants and equipment in the US. Only 17 percent of the US manufacturing base actually made products not meant to kill. In this regard, bankruptcy and collapse is much-deserved, a comeuppance long overdue. On the bright side, Johnson notes that “bankruptcy will not mean the literal end of the United States any more than it did for Germany in 1923, China in 1948, or Argentina in 2001. It might, in fact, open the way for an unexpected restoration of the American system, or for military rule, revolution, or simply some new development we cannot yet imagine.” 

 

~ Trends for Downsizing the US: The Bright Side of the Panic of ‘08  ~